The Association of British Insurers (ABI) says fraud has topped £1 billion a year for the first time.

The industry body says there are now 2,390 fake or inflated claims made every week.

That costs the industry and honest policy holders some £90 million a month.

In total during 2012, fraudulent claims totalled £1.1bn, with home insurance frauds the most common.

There were 51,000 cases involving dishonest householders during the year.

The value of fraudulent claims as a whole has doubled since 2007.

"Fraud comes in all shapes and sizes, from the opportunist fraudster who may lose their watch and inflate its value, through to the highly organised cash for crash gangs," said Malcolm Tarling of the ABI.

While fraud may seem a victimless crime, the industry is keen to point out that it does result in higher costs.

"These costs get passed on to customers through higher premiums," says Mr Tarling.

"Which is why the industry is doing everything in its power to ensure dishonest claims aren't paid and honest ones are."

Psychology

But there may be another way to encourage honesty when policy-holders make claims.

Market survey company Consumer Intelligence has been working to find easier ways to cut down on fraud.

Image caption
Fraud increases premiums for all policy-holders

By working with insurance firms, psychologists and behavioural economists, they claim to have found some simple strategies that could cut down on fake claims.

"One of the things about the way claim forms are designed is that you get to sign the form at the end to say that every thing you've written was the truth," says Ian Hughes, chief executive of Consumer Intelligence.

"The problem is, by the time you've got to the end you have already told all the lies."

Consumer Intelligence recommends bringing the part of the form that is signed to the top, so that a signature is recorded before anything else is written.

"Our research shows that one simple thing can reduce fraud by 9%," Mr Hughes says.

The hope is that by understanding the way the mind is wired, the industry will better serve the needs of customers.

If that lowers fraud too, everyone will find it cheaper to insure their most cherished possessions.